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3 Ways You Could Be Leaving Some of Your Social Security Benefits on the Table

The median retirement savings for American households is just $87,000 -- no small sum, but not nearly enough to fund a typical retirement, either. While many workers try their best to save regularly, it's not always easy.

Many hope their Social Security benefits will make up the difference between what they have and what they need. But that depends in part on your choices. Below are three common mistakes that could shrink your checks and how you can avoid them in retirement.

1. Applying before working 35 years

The Social Security Administration looks at your earnings history from your 35 highest-earning years when calculating your benefit. You can qualify for checks with as little as 10 years of work history, but you may be disappointed with the size of your benefit if you apply before you pass the 35-year mark.

The government adds in zero-income years when calculating the benefits of those with shorter work histories. Even one of these permanently reduces your checks. For example, if you earned $60,000, adjusted for inflation, for 35 years, your benefit based on the current formula would be $2,281 per month. But if you had one zero-income year included, your benefit would be $2,235 per month. That's $46 less.

This loss is permanent, and it can really add up over a lifetime. Over 20 years, the $46 monthly loss above would cost you over $11,000 in benefits. So whenever possible, aim to work a minimum of 35 years before applying for Social Security.

2. Signing up at 62 without considering the consequences

Signing up as soon as you become eligible for Social Security at 62 isn't always the wrong move. It can be the right choice for some workers, especially those with a pressing financial need or those with short life expectancies. But for most other workers, waiting to apply is the better choice.

Every month you delay Social Security increases your benefit by anywhere from 5/12 of 1% to 5/9 of 1% per month until you reach your full retirement age (FRA), which is 66 to 67 for today's workers. After this point, it grows even faster at 2/3 of 1% per month. You can continue growing your checks until you qualify for your maximum benefit at 70.

Waiting means fewer checks, but it can lead to a significantly larger lifetime benefit. Imagine you qualify for a $1,500 monthly Social Security benefit at 62 and have an FRA of 67. By delaying until 70, you could get $2,657 per month. That's $1,157 more per month. But if you did this, you'd also get eight fewer years of benefits.

That's where your life expectancy and financial situation come into play. If waiting to claim would put a huge strain on your budget now, it's not a good idea. It's also not worth waiting if you don't expect to live beyond your 70s. In our example above, you'd need to live to at least 81 for delaying until 70 to result in a larger lifetime benefit than claiming at 62.

And, of course, remember that you can claim at any age between 62 and 70 as well. If you want larger checks but don't feel comfortable waiting until 70, delaying until your FRA could be a good middle ground.

3. Not coordinating with your spouse

Married couples often receive two Social Security benefits, though this also makes their Social Security strategy a bit more complicated than single adults'. Married people must think about how their decision will affect their partner's spousal benefit and their household benefits overall.

A spousal benefit is a benefit available to the spouse of a qualifying worker. It's worth up to one-half of what the worker qualifies for at their FRA. But you can only claim a spousal benefit if your partner is already on Social Security, and claiming under your FRA can shrink your checks up to 35%. You also may not get a spousal benefit if your own Social Security retirement benefit is larger than the spousal benefit.

When both people have earned similar amounts, it's generally wise for each to delay Social Security as long as possible, barring health or financial issues. When there's a significant income disparity, the lower earner might prefer to claim early, then switch to a spousal benefit when the higher earner eventually applies.

These might seem like decisions you don't have to worry about now if you're not yet eligible for Social Security. But it's important to have a claiming strategy in place so you can estimate how much you'll get from the program in retirement.

Start by creating a my Social Security account so you can estimate what your future benefits will be at various ages. Then, use this information to choose a tentative claiming age, but be prepared to adapt your strategy over time as needed.


This article was written by Kailey Hagen from The Motley Fool and was legally licensed through the DiveMarketplace by Industry Dive. Please direct all licensing questions to

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